How does Collect-On-Delivery (COD) work?

Someone wants me to ship something to them COD. The Post Office charges a fee for the service. Does the recipient pay the COD service fee that post office charges, as well as the postage cost? Or do I have to pay the COD service fee and the recipient pays only the postage cost?

At work, I sit all day at a computer shipping parcels UPS. We get a small portion that go CAOD, that way we don't have to wait for credit checks to see if they will pay their bill. All the shipping charges (including the $9 assesed by UPS for a COD) are paid by the customer. Think of it as a fee for not having to do a credit check.

Don't eat any additional shipping costs and pass these charges on to your customer when shipping COD.

It is standard business procedure for the customer to pay shipping, plus a surcharge, plus any customer requested extra services, and COD falls under that. In my company we add 15% to the total shipping charges (including options).

If the receiving customer pays the letter carrier in cash there is a charge for the Postal Service to make out a money order to the shipper. If the receiving customer pays by check, the check is to be made out to the mailer, and no extra fee is added on.
The other basic COD charges are to cover the extra labor involved in the process.